32. The discussion above suggests that if microcredit is to play a strong role in development, certain requirements need to be fulfilled. The most crucial requirement is to perceive microcredit lending as part of a comprehensive programme of support to the small enterprise sector. According to CGAP estimates, the sector already employs 500 million of the poor; it constitutes an active base for strengthening the private sector in a large number of developing countries. This would entail Governments of developing countries formulating plans and programmes to support small enterprises in general, of which microcredit should be an integral part. Furthermore, the regulatory framework should be receptive to small enterprises. Many micro-borrowers have complained of this particular shortcoming in developing countries.

33. There are many examples of successful interventions in the OECD countries in favour of small enterprises, the foremost among them being the United States Small Business Administration is a rather remarkable organization that is fully backed by the Government, operates through the private sector and provides the small business sector with a wide array of support services, including information and training. (Of course, commercial rates of interest prevail in the programme).

34. Developing countries could benefit by instituting similar comprehensive programmes, eventually involving the private sector and, where applicable, efficient non-governmental organizations. The United Nations could provide more robust technical assistance programmes in that direction. There is a delicate balance to be struck between getting the poor eventually into the market economy and commercial lending rates on the one hand, and the importance of providing low-cost assistance to them at the initial stage of their entrepreneurship.

35. Targeting is a particularly thorny topic. There have been allegations that in fact the very poor are so weak as not to benefit from microlending, and that it is the "better off poor" that benefit. While all the poor need to be included in the programmes, the shortage of funds impels organizers to make special efforts to reach the less well-off among the poor. Microcredit should be viewed as complementary to the provision of basic services like education, housing, health and nutrition. The latter are indispensable in the fight against poverty.

36. A crucial part of any future effort should be to strengthen the administrative structures of existing microcredit institutions proliferate. It is possible that economies of scale are important in microlending. Dynamic leadership and paid management staff are probably crucial. The provision of information on available services to the poor is particularly essential. This is not at present the case, even in some advanced developing countries. Information on services for the poor is rarely made readily available.

37. In that context, the long-term financial sustainability of microcredit operations deserves particular attention. In the more successful schemes, repayment rates are high, but this is not so with many operations that do not have a high profile. In the absence of long-term sustainability, microcredit operations become a welfare or charity operation. While the latter have their own place in development in some circumstances, they should not characterize microcredit institutions.

38. Probably the single most important element in ensuring long-term sustainability of these operations is to include in them the savings mobilization function. This is not always the case at the present time. The operation that lends to the poor should also cater to their savings needs. In many developing countries, savings habits are quite widespread, but the institutional structures do not usually cater to them. The possibility of combining savings and lending operations in some form of credit union organization should always be explored. Once again, the credit union movements in the OECD countries could be emulated by developing countries. International organizations could provide technical assistance in the setting up of frameworks for credit unions and in strengthening their management.

39. Donor countries have a special responsibility to ensure that financial intermediation programmes are soundly based, operate through solid local entities and involve the public sector and that monitoring is an important part of the process. To some extent, the recent prominence given to those operations is donor-driven; the responsibility on the donors is subsequently heavy. It is particularly important that donor funds, whether grants or loans, not be perceived in recipient countries as simple transfers.

40. Coordination among the donor countries has in fact been perceived to be weak in many settings, thus giving rise to duplicative projects and fragmentation of available institutional capability in the developing countries. The CGAP process should be greatly strengthened and directed to better donor coordination. The United Nations system can help in that process, especially at the field level. The United Nations system also needs to spread a more realistic notion of the potential of microcredit approaches, and to put them in the broader perspective of the fight to eradicate poverty